Tax reform, dead? Advocate says stars are actually aligned for it this year

Tax reform isn’t just alive, something will happen in Congress on it this year, predicts RATE Coalition co-chair James Pinkerton.

“Unlike a lot of issues, this is something where the stars are sort of aligning already,” Pinkerton, who worked on domestic policy in the Reagan and George H.W. Bush White Houses, told MarketWatch in an interview this week.

The group Pinkerton co-chairs counts among its members big companies including AT&T, FedEx, Nike and Viacom. The coalition has pushed for reducing the U.S. corporate rate of 35% (the world’s highest) to 25%, saying the higher rate makes the U.S. less competitive and hurts growth.

Others are skeptical about any movement on corporate or individual tax reform this election year, especially after Senate Finance Committee Chairman Max Baucus was tapped as U.S. ambassador to China. Baucus and Rep. Dave Camp have worked closely on tax reform, and Baucus late last year released a two-phase corporate plan.

So how exactly are the stars aligning?

“At one time or another, President Obama, [House] Speaker [John] Boehner, top Democrats, top Republicans have said we would like to do some kind of deal,” Pinkerton says. Less than a week ago, he points out, National Economic Council Director Gene Sperling reiterated that Obama would be willing to do corporate tax reform that cuts rates to 28%. (Sperling said that should be coupled with infrastructure investment.)

Pinkerton, who co-chairs the group with former Clinton administration official Elaine Kamarck, adds that Sen. Ron Wyden, the Oregon Democrat likely to take over the Finance Committee, is a tax reformer himself. Along with Indiana Republican Dan Coats, Wyden has proposed lowering the corporate rate to 24% and reducing the number of tax brackets for individuals to three from six. The proposal also includes a one-time repatriation of foreign earnings. Read the Wyden-Coats plan.

“Sen. Wyden is very much a champion of our overall idea,” Pinkerton says.

To be sure, the idea of lowering the corporate tax is not universally popular. Earlier this week the group Citizens for Tax Justice blasted a New York Times op-ed by Boston University Prof. Laurence Kotlikoff titled “Abolish the corporate income tax.” Claims that doing so would help workers are bogus, the group said.

Meanwhile, with Obama’s next State of the Union coming up on Jan. 28, Pinkerton says he’s optimistic the president will again push for tax reform. In his 2013 speech, Obama said “now is our best chance for bipartisan, comprehensive tax reform.”

Corporate reform of course hasn’t gotten across the finish line since then. But Pinkerton argues the election may be a motivating factor.

“It helps any incumbent to be able to say, ‘Look, I know things are hard, I know you’re hurting, and I’ve done something to help you,” he says. And there will be action “in this Congress,” Pinkerton predicts.